2. Basis of preparation of financial statements
• The financial statements of the Bank have been prepared under the
historical cost convention and in accordance with Bangladesh Financial
Reporting Standards (BFRSs), the "First Schedule" (section 38) of the Bank
Company Act 1991, as amended by the BRPD Circular no. 14 dated 25
June 2003, other Bangladesh Bank Circulars, the Securities and Exchange
Rules 1987 and other laws and rules applicable in Bangladesh.
• In case the requirement of provisions and Circulars issued by Bangladesh
Bank differs with those of other regulatory authorities and accounting
standards, the provisions and Circulars issued by Bangladesh Bank shall
prevail.
3. Components of Financial Statements of Bank Companies
• Balance Sheet
• Profit & Loss Account
• Cash Flow Statement
• Statement of Changes in Equity
• Liquidity Statement (Additionally included in the BRPD 14)
Asset and Liability Maturity Analysis
• Notes to the Financial Statements
4. Liquidity Statement
Particulars Basis of Use
Cash, Balance with other
banks and financial
institutions, money at call and
short notice etc.
Stated maturity/observed
behavioral trend.
Investments Residual maturity term.
Loans and advances Repayment/maturity schedule
and behavioral trend (non-
maturity products).
Fixed assets Useful life.
Other assets Realization/amortization basis.
Borrowings from other banks
and financial institutions
Maturity/repayment term.
Deposits and other accounts Maturity and behavioral trend
(non-maturity products).
5. Balance Sheet
Loans and Advances
• Maturity grouping of loans and advances
• Loans and advances on the basis of significant concentration:
Advance to allied concern of directors
Advance to chief executive and other senior executives
Advance to customers’ group
Large loan details (number of clients and outstanding amount more
than 10% of bank’s total capital and classified amount therein)
Industry-wise concentration
Sector-wise concentration
Geographical location-wise concentration
Inside and outside Bangladesh
Security/Collateral-wise concentration
6. Balance Sheet
Loans and Advances (Contd.)
• Loans and advances on the basis of significant concentration:
Classified and unclassified loan
Unclassified – Standard and Special Mention Account (SMA)
Classified – Sub-standard, Doubtful and Bad/Loss
Movement of classified loan
Business segment-wise concentration of Classified Loans and
Advances (NPL)
Industry-wise concentration of Classified Loans and Advances (NPL)
Cumulative amount of written off loan for which law suits have been
filed
7. Balance Sheet
Provision on Loans and Advances
Particulars Rate
General provision on:
Unclassified (including SMA) general loans and advances 1%
Unclassified (including SMA) small and medium enterprise 0.25%
Unclassified (including SMA) Loans to BHs/MBs/SDs against shares etc. 2%
Unclassified (including SMA) loans for housing finance and on loans for
professionals
2%
Unclassified consumer financing other than housing finance and loans for
professionals
5%
Short term agri credit and micro credit 2.5%
Off balance sheet exposures 1%
8. Balance Sheet
Provision on Loans and Advances (Contd.)
Particulars Rate
Specific provision on:
Substandard loans and advances other than short term agri credit and micro
credit
20%
Doubtful loans and advances other than short term agri credit and micro credit 50%
Bad/loss loans and advances 100%
Substandard short term agri credit and micro credit 5%
Doubtful short term agri credit and micro credit 5%
9. Balance Sheet
Other assets
• Income generating
Investment in shares of subsidiary companies (In Bangladesh and
outside Bangladesh)
• Non-Income generating
Stationery, stamps, printing materials in stock etc.
Security deposit
Advance to staff for expenses
Advance rent
Prepayments and advance to vendors
10. Balance Sheet
Non-banking assets
Non-banking assets are acquired on account of the failure of a borrower to
repay the loan in time after receiving the decree from the court regarding
the right and title of the mortgaged property. The bank was awarded
absolute ownership on few mortgaged properties (mostly land) through the
verdict of honorable court under section 33(7) of the ‘Artharin Adalat Act
2003’. The value of the properties has been recognized in the financial
statements as non-earning assets on the basis of third party valuation
report.
Value of the assets received in addition to the loan outstanding/written off
loans has been kept as reserve against non-banking assets.
11. Balance Sheet
Deposits and other accounts
• Current deposits and other accounts, etc.
• Bills payable
Payment Order Issued
Demand Draft Issued
• Savings bank deposits
• Fixed deposits
Special notice deposits (SND) account
Term deposits account
• Bearer Certificates of Deposit
12. Balance Sheet
Other liabilities
• Provision for loans and advance
General provision on unclassified loan and specific provision on classified
loan are presented under the captioned subject. It is separately recorded
under other liabilities not deducted from loans and advances.
• Interest suspense account
When a loan becomes classified, the interest of that loan is required to
record in the interest suspense account (a liability account) in lieu of
booking as interest income.
13. Balance Sheet
Capital Adequacy
Capital adequacy symbolizes the financial strength and stability of a bank. It
limits the extent up to which banks can expand their business in terms of
risk weighted assets. Like all commercial institutions, banks too constantly
look at ways of expanding their operations by acquiring property, plant and
equipment, opening branches, in addition to mobilizing deposits, providing
loans and investing in other assets.
Regulatory capital requirements are therefore necessary to prevent banks
from expanding beyond their ability to manage (over trading), to improve
the quality of bank’s assets, to control the ability of the banks to leverage
their growth and to lead to higher earnings on assets, leading to peace of
mind of all stakeholders.
14. Balance Sheet
Capital adequacy ratio (BASEL II)
Currently banks are required to maintain CAR @ 10% on their risk weighted assets.
• Tier – I (Core capital)
Paid up capital
Statutory reserve
General reserve
Dividend equalization reserve
Retained earnings
Non-controlling interest
• Tier –II (Supplementary capital)
General provision against UC loans and contingent assets
Revaluation Reserve for Securities up to 50%
Assets Revaluation Reserves up to 50%
• Tier –III (Additional Supplementary capital)
- Now abolished in Basel III
15. Balance Sheet
Statutory Reserve
As per the Section 24 of Bank Company Act 1991 (amended up to 2013), a
bank company shall have to transfer not less than 20% of its profit before
tax to “Statutory Reserve Fund” in each year until the sum of statutory
reserve and share premium will be equal to the paid up capital of the bank.
Dividend equalization reserve
According to BRPD Circular Letter No. 18 dated 20 October 2002, in case of
declaring dividend in cash at a higher rate i.e. more than 20%, a sum equal
to the amount of dividend in excess of 20% shall have to be transferred to
the Dividend Equalization Reserve Fund, which shall be treated as “Core
Capital” of the bank.
16. Balance Sheet
Off-Balance Sheet Items
• Acceptances & Endorsements
• Letters of Guarantee
• Irrevocable Letters of Credit
• Bills for Collection
• Other Contingent Liabilities
17. Mandatory Departure from BFRS
As such the Bank has departed from some of the requirements of BFRSs in
order to comply with the rules and regulations of Bangladesh Bank which
are disclosed below:
i. Presentation of financial statements
BFRSs: As per BAS 1 Financial Statements shall comprise statement
of financial position, comprehensive income statement, changes in
equity, cash flows statement, adequate notes comprising summary
of accounting policies and other explanatory information. As per
para 60 of BAS 1, the entity shall also present current and non-
current assets and current and non-current liabilities as separate
classifications in its statement of financial position.
18. Mandatory Departure from BFRS
i. Presentation of financial statements (Contd.)
Bangladesh Bank: The presentation of the financial statements in
prescribed format (i.e. balance sheet, profit and loss account, cash
flows statement, changes in equity, liquidity statement) and certain
disclosures therein are guided by the "First Schedule" (section 38) of
the Bank Companies Act 1991 (amendment up to 2013) and BRPD
Circular no. 14 dated 25 June 2003 and subsequent guidelines of BB.
In the prescribed format there is no option to present assets and
liabilities under current and non-current classifications.
19. Mandatory Departure from BFRS
ii. Investments in shares and securities
BFRSs: As per requirements of BAS 39 investments in shares and
securities generally fall either under 'at fair value through Profit and
Loss Account' or under 'available for sale' where any change in the
fair value at the year-end is taken to Profit and Loss Account or
Revaluation Reserve Account respectively.
Bangladesh Bank: As per BRPD Circular no. 14 dated 25 June 2003
investments in quoted shares and unquoted shares are revalued at
the year-end market price and as per book value of last audited
balance sheet respectively. Provision should be made for any loss a
rising from diminution in value of investments (portfolio basis);
otherwise investments are recognized at costs.
20. Mandatory Departure from BFRS
iii. Provision on loans and advances
BFRSs: As per BAS 39 an entity should undertake impairment
assessment when objective evidence of impairment exists for financial
assets that are individually significant. For financial assets which are
not individually significant, the assessment can be performed on an
individual or collective (portfolio) basis.
Bangladesh Bank: As per BRPD Circular no. 14 dated 23 September
2012, BRPD Circular no. 19 dated 27 December 2012 and BRPD Circular
no. 16 dated 18 November 2014, a general provision @ 0.25% to 5%
under different categories of unclassified loans (standard/SMA loans)
should be maintained regardless of objective evidence of impairment. And
specific provision for sub-standard/doubtful/bad-loss loans should be
made at 20%, 50% and 100% respectively on loans net off eligible
securities (if any). Also, a general provision @ 1% should be provided for
certain off-balance sheet exposures. Such provision policies are not
specifically in line with those prescribed by BAS 39.
21. Mandatory Departure from BFRS
iv. Other comprehensive income
BFRSs: As per BAS 1 elements of Other Comprehensive Income (OCI)
can be presented in a separate statement i.e. Other Comprehensive
Income or can be included in a Single Statement of Comprehensive
Income.
Bangladesh Bank: The scheduled banks in Bangladesh have been
using certain prescribed templates of financial statements (including
names of those financial statements) issued by Bangladesh Bank.
Those templates do not include ‘Other Comprehensive Income’ nor
are the elements of OCI allowed to be included in a Single
Comprehensive Income Statement (Profit & Loss Account, as per BB
format). As such the bank does not prepare a separate OCI
Statement. However elements of OCI, if any, are shown in the
statements of changes in equity.
22. Mandatory Departure from BFRS
v. Cash and cash equivalents
BFRSs: Cash and cash equivalent items should be reported as cash
item as per BAS 7.
Bangladesh Bank: Some highly liquid assets such as money at call
and short notice, T-bills/bonds, prize bonds are not prescribed to be
shown as cash and cash equivalents rather shown as face item in the
Balance Sheet. However, in the Cash flow Statement, Money at call
and short notice and Prize bonds are shown as cash and cash
equivalents beside cash in hand, balance with BB and other banks.
23. Mandatory Departure from BFRS
vi. Non-banking assets
BFRSs: No indication of non-banking assets is found in any BFRSs.
Bangladesh Bank: As per BRPD Circular no.14 dated 25 June 2003,
there exists a face item named non-banking assets.
24. Mandatory Departure from BFRS
vii. Cash flows statement
BFRSs: Cash flow statement can be prepared either in direct method
or indirect method. The presentation method is selected to present
cash flow information in a manner that is most suitable for the
business or industry. Whichever method selected should be applied
consistently.
Bangladesh Bank: As per BRPD circular 14 dated 25 June 2003, cash
flow statement is to be prepared following a mixture of direct and
indirect method.
25. Mandatory Departure from BFRS
viii. Balance with Bangladesh Bank: (CRR)
BFRSs: Balance with Bangladesh Bank should be treated as other
assets as it is not available for use in day to day operations as per
BAS 7.
Bangladesh Bank: Balance with Bangladesh Bank should be treated
as cash and cash equivalents.
26. Mandatory Departure from BFRS
ix. Off balance sheet items
BFRSs: No requirement of disclosure for off balance sheet items as
there is no concept of off balance sheet items in any BFRS.
Bangladesh Bank: As per BRPD Circular no.14 dated 25 June 2003,
off balance sheet items e.g. L/C, L/G, Acceptance should be
disclosed separately on the face of the Balance Sheet.
27. Mandatory Departure from BFRS
x. Disclosure of appropriation of profit
BFRSs: No requirement of disclosure for off balance sheet items as
there is no concept of off balance sheet items in any BFRS.
Bangladesh Bank: As per BRPD circular 14 dated 25 June 2003, an
appropriation of profit should be disclosed on the face of Profit and
Loss Account.
28. Mandatory Departure from BFRS
xi. Loans and advance net of provision
BFRSs: Loans and advances should be presented net of provisions.
Bangladesh Bank: As per BRPD circular 14 dated 25 June 2003,
provision on loans and advances should be presented separately as
liability and cannot be netted off against loans and advances.
29. Compliance with BASs and BFRSs
Name of BASs / BFRSs BASs/
BFRSs
No. Status
Presentation of Financial Statements BAS 1 * Applied
Inventories BAS 2 N/A
Statement of Cash Flows BAS 7 Applied
Accounting Policies, Changes in Accounting Estimates and
Errors
BAS 8 Applied
Events after the Reporting Period BAS 10 Applied
Construction Contracts BAS 11 N/A
Income Taxes BAS 12 Applied
Property, Plant and Equipment BAS 16 Applied
Leases BAS 17 Applied
30. Compliance with BASs and BFRSs
Name of BASs / BFRSs BASs/
BFRSs
No. Status
Revenue BAS 18 Applied
Employee Benefits BAS 19 Applied
Accounting for Government Grants and Disclosure of
Government Assistance
BAS 20 N/A
The Effects of Changes in Foreign Exchange Rates BAS 21 Applied
Borrowing Costs BAS 23 N/A
Related Party Disclosures BAS 24 Applied
Accounting and Reporting by Retirement Benefit Plans BAS 26 N/A
Consolidated and Separate Financial Statements BAS 27 Applied
Investments in Associates BAS 28 N/A
31. Compliance with BASs and BFRSs
Name of BASs / BFRSs BASs/
BFRSs
No. Status
Interests in Joint Ventures BAS 31 N/A
Financial Instruments: Presentation BAS 32 *Applied
Earnings per share BAS 33 Applied
Interim Financial Reporting BAS 34 Applied
Impairment of Assets BAS 36 Applied
Provisions, Contingent Liabilities and Contingent Assets BAS 37 *Applied
Intangible Assets BAS 38 Applied
Financial Instruments: Recognition and Measurement BAS 39 *Applied
Investment Property BAS 40 N/A
32. Compliance with BASs and BFRSs
Name of BASs / BFRSs BASs/
BFRSs
No. Status
Agriculture BAS 41 N/A
First-time Adoption of Bangladesh Financial Reporting
Standards
BFRS 1 N/A
Share-based Payment BFRS 2 N/A
Business Combinations BFRS 3 Applied
Insurance Contracts BFRS 4 N/A
Non-current Assets Held for Sale and Discontinued
Operations
BFRS 5 *Applied
Exploration for and Evaluation of Mineral Resources BFRS 6 N/A
Financial Instruments: Disclosures BFRS 7 *Applied
Operating Segments BFRS 8 Applied
33. Compliance with BASs and BFRSs
Name of BASs / BFRSs BASs/
BFRSs
No. Status
Agriculture BAS 41 N/A
First-time Adoption of Bangladesh Financial Reporting
Standards
BFRS 1 N/A
Share-based Payment BFRS 2 N/A
Business Combinations BFRS 3 Applied
Insurance Contracts BFRS 4 N/A
Non-current Assets Held for Sale and Discontinued
Operations
BFRS 5 *Applied
Exploration for and Evaluation of Mineral Resources BFRS 6 N/A
Financial Instruments: Disclosures BFRS 7 *Applied
Operating Segments BFRS 8 Applied
34. Compliance with BASs and BFRSs
Name of BASs / BFRSs BASs/
BFRSs
No. Status
Consolidated Financial Statements BFRS 10 Applied
Joint Arrangements BFRS 11 N/A
Disclosure of Interests in Other Entities BFRS 12 Applied
Fair Value Measurement BFRS 13 *Applied
*Subject to departure described earlier
N/A = Not Applicable
35. Compliance with BASs and BFRSs
New Accounting Standards not yet Adopted
Although International Accounting Standard Board (IASB) has issued a
new standard (IFRS 9) along with related amendments to existing
standards (IAS/ BAS 32, 39) but none of these have been adopted and/ or
endorsed locally as BAS/ BFRS and as such any possible impact could not
be determined.